The Tommy Hilfiger Corporation is up for sale, as was reported yesterday. According to financial sources, Hilfiger is being quietly shopped around to select potential buyers. Sources said the asking price is at least $1.82 billion, but could go as high as $2.16 billion. The deal could net Tommy Hilfiger himself up to $250 million. Financial sources said a deal could be inked before Thanksgiving, meaning the sale process will proceed fairly quickly over a 60- to 90-day period.
The company, which posted first-quarter earnings results last week, ended the quarter with over $500 million in cash, according to a research note by an analyst at Lehman Brothers. For the first quarter ended June 30, net income was $319 million versus $329 million in the same year-ago quarter. Financial sources said Hilfiger has generated substantial interest among both financial and strategic players. Names whispered in the industry regarding strategic buyers include Jones Apparel Group, VF Corp. and Liz Claiborne, the typical players that routinely get named when a consumer brand is put on the auction block.
One name that has come up repeatedly is Li & Fung USA, which is changing its image from a sourcing powerhouse to a global branding model. Another analyst said many people don’t recognize the potential for the Karl Lagerfeld business, which Tommy Hilfiger Corp. acquired last December. Lagerfeld is a huge opportunity in Europe and Hilfiger has the infrastructure to expand the brand in Europe . The analyst also believes there’s a good chance Hilfiger might have a financial player as its new parent. “All that a financial buyer wants is to pay down the debt and then go public. Hilfiger is ideal for a financial buyer because it has [substantial] cash on hand and huge cash flow,” he said.
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Financial sources familiar with the book’s contents said that $250 million from the company’s cash could be used to buy out designer Tommy Hilfiger’s contract. Until last week, Hilfiger’s subsidiary Tommy Hilfiger U.S.A. Inc. was being investigated by the U.S. Attorney’s office for its commission policies. The company last Wednesday said it settled the U.S. tax probe for $18.1 million, and that the U.S. Attorney’s office agreed not to prosecute Hilfiger or its subsidiary. Although there are still some state tax issues pending, now that the criminal probe is resolved, the path seems clear for the company to be sold.